WA government in talks over Griffin funding

The West Australian government has revealed it is in discussions to provide about $4 million in advance payments to Ric Stowe’s collapsed Griffin Coal company, which would help bolster the group’s cash flow and maintain production.

After rejecting a coal sales proposal by administrator KordaMentha on Monday, a government spokesman on Tuesday night revealed that it would agree to a revised plan, which included pre-paying for coal supplied to its power stations for up to two weeks.

However, the deal is subject to a number of conditions including assurances by Griffin Coal to meet strict volume and quality measures.

The earlier proposal had involved the government prepaying for much more coal and was free of many of the new conditions.

Griffin Coal, the state’s second biggest coal supplier, called in administrators at the weekend owing 700 creditors about $700 million after it failed to meet interest and tax payments.

The government’s talks with administrators come after it has tried to avoid perceptions that is providing financial assistance to a private company, mainly by Premier
Colin Barnett
controversially revoking statements made by his energy minister, Peter Collier, that the government would guarantee Griffn Coal worker entitlements.

"Being a private company, this is a matter for the administrators and the company and there is no government money involved,’’ Mr Barnett explained about his decision.

A creditors’ meeting has been scheduled for January 13.

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KordaMentha partner Brian McMaster is considering an asset sale or a restructure of Griffin Coal, which is contracted to provide coal to the WA government power stations until Wesfarmers’ Premier Coal takes over the contract on July 1.

Wesfarmers is considered to be a possible buyer of the Griffin mines.

Investment bank Nomura estimates that in the event of a sale of Griffin Coal unsecured creditors including US bondholders owed $530 million would receive a return in the dollar in the mid 30 to high 40 range.

The cause of the collapse remains unclear, although the company’s cash flows were hit late last year by higher costs and lower reduced production due to bad weather, curbing its ability to pay its interest bill.

The Barnett government’s moves to strengthen Griffin Coal’s cash flows came after Liberal senator
Nick Minchin
called on the federal government to play a more active role.

"The Collie mining activities are highly productive and contribute significantly to the Western Australian economy, particularly in the state’s south-west,’’ Senator Minchin said.

"The Rudd government needs to step up and show some leadership and work with the Western Australian state government, the administrators and unions.’’

Senator Minchin said the number one priority was to ensure the continued operation of the mine.

As the state government negotiates on the new coal sales proposal its backflip on entitlements has drawn heavy criticism from the Construction, Forestry, Mining and Energy Union and Opposition Leader Eric Ripper, who met with Griffin Coal workers in Collie yesterday along with KordaMentha partner Brian McMaster.

"Should the Griffin group be unable to trade its way out of these problems, the administrators and the state must seek to ensure that the company continues to operate and jobs are preserved,’’ Mr Ripper said.

“Any transfer of licences or rights requiring the approval of the state should be done on the condition that new owners accept the liability for the entitlements due to these workers and their families.’’

In a statement, Mr Barnett said the government would continue to meet the administrators to “ensure that whatever decisions they make are fair for employees and that workers’ entitlements are preserved’’.